Shahid Khan: The New Face Of The NFL And The American Dream

With sweat and smarts, Pakistan-born Shahid Khan built a $3.4 billion manufacturing juggernaut from the ruins of an Illinois auto parts maker. To celebrate, he just bought one of the worst teams in the NFL, with the pledge of a similar turnaround. Only in America, folks.

Driving down a dusty back road in Danville, Ill., Shahid Khan narrates the fall of American manufacturing. “The Allith-Prouty plant closed there. That was 1,400 jobs,” he says, pointing out boarded-up buildings on our left. Some 300 people used to work at the welding plant next door. “Gone,” he shrugs. Another 7,000 or so were lost when Hyster trucks closed shop.

As we pass more dilapidated warehouses and bulldozed dreams—800 jobs lost at the mill around the corner, 1,200 across the way—we seem like tourists in an industrial wasteland, the ruins of a manufacturing golden age, with crumbling Danville playing the role of Pompeii or Luxor, although those ruins might be better preserved, Khan notes with a rueful smile. “Around you, right now, I can count 30,000 jobs that just disappeared,” he says, shaking his head.

With flowing black hair and the thick handlebar mustache of a man used to leaving a lasting impression, the 62-year-old Khan, driving a shiny white Grand Cherokee, is a swashbuckling contrast to the desolation around him. While Danville and the rest of the Rust Belt were deteriorating over the last 40 years, Khan was moving in exactly the opposite direction. The sole owner and CEO of Flex-N-Gate, he built one of the biggest automotive parts suppliers in North America almost from scratch from his headquarters just 35 miles away and now employs more than 13,000 people at 52 factories around the globe. Sales reached $3.4 billion in 2011. FORBES estimates his net worth at $2.5 billion, placing him in the top half of the soon-to-be-released 2012 Forbes 400.

Credit: Jon Fletcher For Forbes

An enormous accomplishment for anyone, it’s more like a Mars landing for a middle-class kid from Pakistan who flew into Illinois for an engineering degree at 16 and never left. Khan’s is the kind of only-in-America success story that has filled boats and planes with dreamers for the past 150 years, one that gives a face to an ironclad fact: Skilled, motivated immigrants are proven job creators, not job takers.

Khan’s American Dream continued this January, when he purchased the NFL’s Jacksonville Jaguars for $770 million. In so doing, he became the first ethnic-minority owner in a league synonymous with cheerleaders and tailgate parties, Thanksgiving grudge matches and that most secular of U.S. holidays, Super Bowl Sunday. Buying into the NFL, he says, was a statement about the opportunity America offers.

It’s also a statement about his can-do entrepreneurialism. The Jags are to football what Rust Belt manufacturing has been to U.S. industry: the financially challenged, least popular team in a league otherwise envied around the world. A mere 0.4% of NFL fans in a recent ESPN poll cited the Jaguars as their favorite franchise, ranking them dead last out of 32. (Recent headline in The Onion : “New Commercial Posits Existence of Jaguars Fans.”)

Credit: Jon Fletcher For Forbes

They have the fourth-smallest market in the league, with just 1.4 million people in the Jacksonville metro area. They haven’t had a winning season since 2007, nor won their division since 1999, nor been to the Super Bowl, ever. And they play in a cavernous stadium, 76,877-seat EverBank Field, which Mark Lamping, the Jags’ new team president, describes as “a church built for Easter Sunday,” which in this college-football-crazed region means the annual game between the University of Florida and the University of Georgia. Filling a stadium that size every other Sunday might be simple in New York or Dallas, but it’s proved nearly impossible in northern Florida. In 2005 the Jaguars surrendered, covering nearly 10,000 upper-deck seats with tarps, but they still had trouble selling out, resulting in local television blackouts, which suppressed fan interest even more.

But now they have Shahid Khan, who knows how to find the bright side in a dismal situation—and says he has a plan.

Credit: Jon Fletcher For Forbes

Khan arrived in America—specifically, Champaign, to study engineering at the University of Illinois—in the middle of a blizzard, with no place to stay and with just $500 to his name, which his father had scrimped from his small construction company in Lahore, Pakistan. The dorms hadn’t opened yet, so the 16-year-old spent his first, fitful night at the local YMCA, where a room and a meal put him back $3—an astronomical sum back home. All the money he had in the world seemed to be disappearing before his eyes .

But wandering down to the kitchen the next morning, he discovered his first American miracle: He could recoup his loss in just a few hours washing dishes. “It’s like, wow,” Khan says. “If you put the $1.20 per hour in terms of Pakistan, you’re making more than 99% of the people over there. I’m breathing oxygen for the first time.”

Khan threw himself into his studies, joined the Beta Theta Pi fraternity and met his future wife, Ann Carlson Khan, with whom he would have two children, Shanna and Tony. A month before his 21st birthday he graduated with a B.S. in industrial engineering and wound up staying local, as an engineering manager at Flex-N-Gate, a local aftermarket parts company. At the time the company manufactured auto bumpers through an inefficient process of welding together as many as 15 individual pieces. “You look back at it now,” Khan says, “and you ask, what the hell were they doing?” For the next seven years he oversaw production at Flex-N-Gate, using his engineering training to whittle down the complexity. But Khan was ultimately stymied by the cheap aftermarket business. No one cared about innovation in weight or strength when they were selling spare parts. To truly make an impact, he would have to design for the automakers themselves .

He set to work and what resulted was revolutionary: Stamped from a single piece of steel, Khan’s new bumper slimmed down a truck’s rear end, a diet that pickups increasingly needed to improve fuel economy. With nothing more than a P.O. box and a small-business loan, in 1978 Khan stepped out on his own, and his newly christened Bumper Works gained customers right away. General Motors was importing an Isuzu pickup truck made in Japan that it called the Chevy LUV, but the vehicle missed its initial weight requirement. Chrysler had similar problems with its Mitsubishi-made Dodge D50. Both trucks benefited from Khan’s bumper diet .

The honeymoon didn’t last long. Just a week after Khan left Flex-N-Gate, the company sued him for stealing trade secrets and breaching fiduciary duty. An injunction would have crippled Bumper Works before it took its first test drive. Low on cash, Khan paid the cheapest lawyer he could find to stand up for Bumper Works in court but effectively ran the defense himself, holed up in the law library at his alma mater at night after overseeing production in Danville during the day.

For two years, despite winning round after round, Khan felt a threat over his head. But he fought on, rather than settle. And shortly after the Illinois Supreme Court refused to hear Flex-N-Gate’s second appeal in 1980, Khan bought his former employer—which was losing $50,000 a month, just as Khan’s business was taking off—for nothing more than the book value of its assets.

Khan has a saying about the auto parts business that seems appropriate for most fields: You don’t have to outrun the bear, just the other guy. He used to carry around a list of 19 competitors until all of them went out of business. That said, shortly after Khan combined operations under the new Flex-N-Gate, the bear—in this case personified by GM—made a run at him. The car giant—the biggest of the Big Three, when those companies controlled 73% of the U.S. market—called him unexpectedly.

Credit: Jon Fletcher For Forbes

Good news: GM loved his revolutionary bumper design and wanted to use it across their entire line of vehicles. Bad news: Flex-N-Gate was too small to ramp up to that kind of production, so GM was going to hand off the design to their large-scale suppliers instead. In a way, Khan’s product was so good that it was going to put him out of business. GM had his core design, the result of a standard contract in which Khan relinquished his intellectual property rights; they didn’t need to deal with his tiny company anymore. GM wasn’t the only American automaker that “used to treat their suppliers like crap,” says Jim Gillette, director of automotive analysis at IHS Automotive. “The history of the industry is strewn with situations where people had a great idea and they just couldn’t get it across.”

Khan, ever optimistic, sees it another way. “It really was the right thing for them,” he says. “We had no business going from making 200 bumpers a day to making 40,000.” But he knew GM had a close relationship with Isuzu, which would soon be exporting cars to the U.S. at low volume. Khan asked GM for help. It was, literally, the least it could do. “They said, ‘Okay, here’s the name and number of a guy in Japan. Knock yourself out.’ ”

As far as lifelines go, this one was thread-thin. He recruited Japanese computer-science Ph.D. students to travel with him as interpreters and slowly gained the trust of the executives at Isuzu. But it proved an opening in the right market at exactly the right time. Japanese carmakers were making their move into the U.S., and they needed suppliers. Khan would grow with them. Mazda soon hired Flex-N-Gate, and from there, Khan got the holy grail, Toyota, and maneuvered to be its sole bumper supplier by 1989, a relationship that has blossomed ever since. By 2001 Flex-N-Gate’s sales topped $1 billion, with Khan’s wealth (he is the sole shareholder) soaring in lockstep.

He made some mistakes along the way: Using tax shelters later disallowed by the IRS that produced hundreds of millions in bogus paper losses, he wound up paying about $85 million in back taxes, and this past April agreed to a 40% penalty on some of that (he’s currently suing various financial advisors, including BDO Seidman, claiming he was misled). But his company continues to grow apace: Last year Flex-N-Gate’s parts were in more than two-thirds of the 12.8 million cars and trucks sold in America, including models from all three big U.S. automakers.

He had been a football fan since his college days—his NFL team was, naturally, the Bears. As his wealth soared, he began studying FORBES’ NFL valuation list annually to see how close he was to being able to afford a franchise. “ As a fan there are times you get frustrated as to what you think a team ought to be doing,” Khan says. “Then there’s an inflection point where, financially, maybe it’s a possibility.”

In 2010 he won the bidding for 60% of the St. Louis Rams. But fellow billionaire Stan Kroenke held a minority stake and the right to match any offer for the rest of the franchise. Only hours before that right was set to expire, he exercised it, spoiling Khan’s chance to buy the Rams and putting to waste two years of negotiations. “You have to take your lumps and face reality,” he shrugs. “There’s always some good in something bad happening to you, and you look for that,” he says.

That good was the Jaguars. Shortly after Kroenke’s purchase was approved, Jags owner Wayne Weaver let Khan know that he was considering a sale. Weaver, co-founder of shoe retailer Nine West, was a formidable businessman who had nonetheless tired of tilting at Jacksonville’s demographic and structural deficiencies. The Jaguars, by many accounts, was the franchise most likely to relocate to Los Angeles, filling in the biggest hole—America’s second-largest metro area is without an NFL team—in professional sports.

Educated by the Rams deal, Khan moved fast. In October 2011 he met Weaver at a bar in the Omni Jacksonville Hotel and hammered out the final price on a cocktail napkin. Taking out $300 million in loans against Flex-N-Gate, Khan agreed to an all-cash deal of $620 million in which he also assumed the Jaguars’ $150 million in debt. “I knew he was going to be an owner,” says Jerry Jones, the Dallas Cowboys owner. “He wasn’t just a tire-kicker.”

Approaching the Jaguars’ turnaround in the same sunny-but-quantitative way he would a struggling auto parts factory, Khan brought in a new head coach, offensive guru Mike Mularkey, but retained the staff that led the team to sixth in total defense last year. “Why change over there, when they’re already good?” Khan asks. Meanwhile, his 30-year-old son, Tony, will helm the team’s new technology and analytics group, turning his love of sports statistics into what the Jaguars hope can be a tangible, Moneyball-esque advantage.

He also recognizes that the ownership change is his best chance to shake the perception of the Jaguars as a failed franchise. “The perception is reality,” Khan admits. “As an engineer, I learned that a long time ago. You don’t want to get into a rational discussion about irrational subjects.” All he can do is work to change those underlying fundamentals, such as making the Jaguars into more of a regional team. This year they are offering special college-football-themed ticket packages, such as a two-game deal for Florida Gators fans that includes a visit from their former hero, current New York Jets backup Tim Tebow. Meanwhile, Khan seeks to expand the fan base—and avoid local TV blackouts—by allowing ticket holders to bring outside food into EverBank Field and tote their toddlers for free.

The most audacious part of Khan’s plan: international expansion. The easiest move would be to flee to the greener pastures of Los Angeles. But as with running a Rust Belt manufacturer, Khan seems eager to defy the odds and stay put (he says he is “committed to Jacksonville”). Borrowing from the Flex-N-Gate handbook, he sees foreign growth potential as a way to do that. Specifically, he wants to make the Jaguars into a global brand, last month securing a “home game” in London each season for four years starting in 2013. “One of the good things is they don’t have a team loyalty,” says Khan, “so we get a chance by being the first team presented; hopefully we can get them.”

Season ticket holders in Jacksonville (yes, some remain) might not be thrilled to see the British take one of their eight annual games, but it’s the lack of die-hard fans at home that makes going to London possible. “There’s a lower opportunity cost,” says NFL executive vice president Eric Grubman. “Because if you take a game or two out of the sold-out Philadelphia market, it costs you a lot. It doesn’t cost you as much in a smaller market.”

Instead of hurting Jacksonville, Khan believes, the Jaguars’ international presence will pull the city along with it by introducing it to potential tourists and businesspeople. “One of the first things I did earlier this year after getting the team, I was at a CEO’s office in Germany at an auto parts company,” Khan says. “And I had a Jaguars jersey for them with their name on the back. They were so excited, because they had just seen the Super Bowl. The only question they had was, Where’s Jacksonville?”

That’s still a big question, says Andrew Brandt, a FORBES contributor and NFL business analyst for ESPN. Marketing is “hollow” without a winning football team. “From how much they’re recognized now in London, it’ll be a manifold increase. But will they have the same name recognition as the Packers, Cowboys and Patriots? No.”

Khan admits it won’t be easy. For him it never has been. But he retains the spirit that comes from people who have seen enough of other parts of the world to appreciate the eternal opportunities of America. “You can do anything you want to do,” Khan says. “You have to work hard, you have to create your own luck, and you have to have some luck also. But here, it’s possible.”

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Outstanding story…love to hear about people that find ways to make things happen! No silver spoon, good ole boy network story here…hard work, hanging in there, and a little luck of being in the right place at the right time. Congrats Mr Khan and the very best of luck to you with your team, should be interesting to follow their story over the next couple of years!

This is a great story about a man who built a company and realized his dreams via the meritocracy that is the United States. It’s these kind of stories that counter the class warfare crowd – Mr. Khan has bridged both sides proving that it can be done. Way to go, Mr. Khan.

Excellent story. These types of people make us realize that it can still happen in America. GO Shahid! I was in the Army, and lost a bit of limousine business, but I learned that Hardwork and digilgent planning can get you there. I am happy in 6 months<I really got by hard work.CSL Transportation, NY Limousine Service